5 Enduring Legal Issues That Still Impact Self-Storage Operators Today

As a business, self-storage faces several legal challenges that just never seem to go away and probably never will. A long-time industry attorney shares five that are particularly persistent and how to manage them.

Murphy Klasing

May 12, 2024

8 Min Read

Imagine if everyone always did the right thing, no one ever lied, there was no need for lawyers and we all lived happily ever after. What a utopia that would be. However, we don’t live in a Hallmark movie, and the legal process continues to be necessary. (Personally, I’m glad, or I’d be out of a job.)

Self-storage is one of those industries in which legal challenges persist and probably always will. In fact, I’ve been helping facility operators grapple with them for 18-plus years. Some issues come and go, but others endure. Following are five that still impact the industry today and are likely to continue being a nuisance in the future.

Wrongful Sales

Wrongful-sale lawsuits will likely always be your No. 1 self-storage legal challenge. Even when you do everything right, it won’t stop a tenant from filing a claim against you. Here in the United States, we favor access to the courthouse, but there’s no one there checking to see if a lawsuit is legitimate when filed. That’s what the lawyers have to point out later. So try as you might, you’ll sometimes face problems, even if your actions are nothing short of angelic.

That said, there are some very practical measures you can take to avoid being liable for a wrongful sale:

  • Attempt to contact any delinquent self-storage tenant more times than the law requires and document those attempts.

  • Reach out to the alternate contact listed on the lease. If you don’t, a jury will wonder why you collected that information but then chose not to use it.

  • Develop a checklist of statutory deadlines and actions, and double check your math and calendar to ensure it’s all correct. You should know when you can send out a notice of default or sale; what those notices must contain; how, when and if you publish the notice of sale; how many days must pass between each activity before you can conduct the auction, etc.

  • If something about the lien-sale process feels wonky or off, proceed with extreme caution. The self-storage industry has been given an extraordinary legal remedy to sell a tenant’s personal belongings without a court order, but a court will not give you any break if you failed to follow the procedure perfectly.

Community Violations

As self-storage facilities pop up in more suburbs and residential areas, operators need to be aware of the local deed restrictions and other such documents. For example, if you purchased or built a facility in a commercially zoned area of a large neighborhood, you may have signed a document at closing through which you promised to follow certain community guidelines. Some may even tell you how many trees and bushes you must have on your property and what certain species you can plant.

In an effort to keep their communities looking a certain way, many small cities are enforcing these commitments more rigorously. Though this isn’t necessarily a bad thing, sometimes the power vested in these organizations is oppressive; and because these agreements are contractual in nature, courts will enforce them.

For example, I’ve seen an increasing number of commercial properties being charged with landscaping and signage violations. These can become lawsuits in which legal fees are generated and payable to the local homeowner’s association. Insurance policies often don’t cover these types of altercations, so you could be looking at hefty fines and penalties.

My advice is simple: Hire a landscaper from the area and have them look at the community guidelines and your self-storage property to ensure you’re compliant. There’s an age-old question: “If a tree falls in the forest with no one there to hear it, will it make a sound?” It has been answered: “Yes, the homeowner’s association will hear it.”

Theft and the Promise of Security

Theft is like a birthmark—it never goes away. As a self-storage operator, you’ll always face the risk of break-ins, and tenants won’t understand why they aren’t your fault.

Make sure your rental agreement is clear about the fact that you aren’t responsible for loss of or damage to tenants’ stored goods. Most courts in most jurisdictions will uphold those contract provisions. The problem comes when you provide security and it breaks down. That can subject you to liability.

In this industry, it’s common to take reasonable measures to secure a facility. For example, you might have a fence, lights that come on at night, an access gate with coded entry, and perhaps coded building access. You want to ensure that your gate functions properly and your emergency door alarms work. However, if you have these measures in place and they fail due to negligence, you may have trouble getting out of a theft-related lawsuit.

Even though you aren’t responsible for a third-party criminal breaking into a self-storage unit, if your actions (or inaction) made your property an easy target, a court may find you liable, even if you disavow security in your lease. For example, if there’s a hole in your fence and you fail to fix it, and a criminal uses it to enter the facility and break into units, a jury could believe you were at least partially responsible for the crime.

Finally, don’t tell customers that your self-storage facility is safe and protected. It may be construed as inducing them to rent from you based on the promise of security. I know that isn’t what you intend, but words matter. So, be honest. Let your tenants know that security is their responsibility. That is why they need to buy a lock and check on their items from time to time.

Personal Injury

It would not surprise me if the first lawsuit ever was Abel’s family suing Cain for wrongful death. Unfortunately, there were no lawyers then and the case stalled out. The point is, that’s about how long personal-injury claims have existed on our planet, and they’ll be here until the end.

So, as a self-storage operator, do what you can to avoid them. Make sure your parking lot and floors are level with no holes, cracks or other tripping hazards. If they do, mark and block the problem areas off until you fix them. Make sure all unit doors function properly and the springs aren’t rusted. Ensure the ceiling isn’t falling down. In other words, make sure your property is safe for employees and customers as well as their families and friends.

That takes a daily walk around to check for issues that may have occurred the day before. Look for spills, cracks, holes, sharp edges, and popped out screws and nails. Do what you can to create a safe environment. Will you still get some injury claims? Yes, but if you’ve done your part to maintain your self-storage facility, the facts will be your defense.

Bankruptcy

If the economy continues on its current path, we may see more self-storage tenants filing for bankruptcy. When a customer files, they’re supposed to list you as a creditor so you receive a notice. If you do and the tenant is delinquent in their payments, do not sell the unit until you’ve obtained a “relief from stay” order. Stop all collection activity and late fees as of the date of the bankruptcy filing. Do not send demand letters, overlock the unit or do anything that would be considered a violation of the stay. There can be harsh punishments from the bankruptcy court if you do.

Your self-storage tenant is required to continue paying rent after they file bankruptcy, but most don’t. So, if they filed chapter 11 or 13, call and offer them the opportunity to move out at no charge. It’ll be better for you to remove them than to wait out what could be a long bankruptcy period. If it’s a chapter 7 filing, call the trustee’s number and offer the same thing. If the tenant won’t move out, call an attorney to see if they can file a motion to lift the stay so you can auction the unit.

Bankruptcy can become a big problem very fast. Let’s say a self-storage tenant owes you two months of rent at $100. Then they file bankruptcy, and you wait six month to call an attorney. The court takes six months to give you the relief from stay order. That’ll cost you $1,400 in rent, plus late fees you can’t recover, plus attorney fees! The moral of the story is: If your bankrupt tenant refuses to move out voluntarily, get counsel involved right away.

Of course, there are other legal issues that plague self-storage operators; but the above five are the ones I see the most, and they’re likely to persist. Consult an attorney when any of these arise. Don’t wait! Legal problems aren’t like a cold that can go away in a couple of weeks. Litigation is likely to endure in the world, but you don’t have to let it derail your business.

Murphy Klasing is a partner with Weycer, Kaplan, Pulaski & Zuber P.C. He has a wide range of appellate, arbitration and trial experience, successfully handling numerous litigation matters. With more than a decade of experience in the self-storage industry, he serves as counsel for Public Storage Inc. in Oklahoma and Texas, and has defended matters involving allegations of breach of contract, code violations, employment issues, fraud, negligence, personal injury, premises liability and theft. To reach him, call 713.961.9045; email [email protected].

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